Easy to build, hard to maintain: financial impact analyst warns PennWest students to keep careful watch over credit scores.

PennWest continued their series of Financial Literacy Webinars on Tuesday, Nov. 15, featuring a presentation on the significance of building credit by Heather Brown, a financial education and impact analyst at the Consumer Financial Protection Bureau. Brown began her presentation with a word of advice to students: poor credit can negatively impact future financial opportunities.

“A poor credit history can really make life difficult,” Brown said. “Maybe you’ve experienced it with others in your family, maybe yourself, already. It’s difficult to get a mortgage or any loan. Rental companies do check credit histories or other consumer reports, and that can make it difficult, depending where your credit is.”

The key to keeping track of your credit history, according to Brown, is familiarity with credit reports. A credit report is an estimation of how likely an individual is to repay loans on time, including data such as basic demographic information and previous or current credit inquiries. These reports are generated by credit bureaus. Brown named three major bureaus for students to be aware of: TransUnion, Experian, and Equifax.

“They do 90% or more of the credit checks for different things,” Brown said. “The first thing you should find out when you’re turned down for a loan is which credit bureau did they use, or credit reporting agency. And of course if you’re turned down, you have a right by law to get a copy of the credit report they had.”

The Fair Credit Reporting Act, passed in 1970, gives consumers the right to promote accuracy, fit, and fairness within consumer credit reporting companies through access to current credit reports. Brown says that this is significant, because changes to your credit report can be long lasting.

“So how long does information stay on a credit report?” Brown questioned. “Good information stays forever, that’s good news. Negative information can stay for seven years. So things stay on a long time, and there’s really no time limit for how long most information can stay.”

Building “good information” is relatively easy, Brown told students. Contrary to popular belief, good credit does not require a large income.

“There are people that go from having no credit score to 650 in six months, even though they have a very small income, because of how they use it,” Brown said. “What impacts your score the most is how you’re paying—paying your bills on time every time.”

Brown suggests students start with a small credit account of some kind, such as a credit card with a low allowance. She said that even if the expenses put on a card are low, consistent payment will quickly accumulate positive credit. For some students, such as Reed Piper, a first-year student at PennWest California, this information was new and very helpful.

“Before attending this webinar, I knew next to nothing about credit,” Piper said. “This webinar helped me learn a lot about credit, specifically how to build and maintain it. I believe it was a worthwhile experience.”

Dr. Nan Li, a professor in PennWest California’s Business Department, and one of the webinar organizers, said that she also learned new information about credit from Brown’s presentation.

“I personally learned that there is a difference between a security freeze and a fraud alert,” said Li. “Even when you put a security freeze on your credit report, you can still obtain new credit.”

Security freezes and fraud alerts, which completely immobilize access to a credit account or provide notice to the consumer when a report is requested, were discussed by Brown as a possible way for students to proactively guard their credit.

“For students that don’t have any credit, and don’t anticipate having it any time soon, I would suggest to just go ahead and put a freeze on it, because people that steal accounts may look for accounts that are inactive,” Brown said. “A fraud alert is not as severe as a freeze. They notify you if someone is seeking credit and you have to approve it. So that’s another way you can do it if you don’t want to do a full-on freeze.”

This advice was given amongst other recommendations for protecting current credit, such as avoiding high interest loans and disreputable credit repair agencies. Brown repeated throughout the presentation that maintenance of good credit is often as significant as building credit initially. Credit is checked by most agencies, including banks, auto insurance companies, and the military, so current, good credit status is essential, regardless of past history.

Brown emphasized that one’s credit score directly influences the accessibility of financial resources and determines how credit can be used in the future.

“If you have great credit, you’re going (to) get loans at better rates,” Brown said. “If you have mediocre, you’ll get more mediocre rates. And if you have poor credit, it’s going to be difficult for you to get things.”